Thought leadership from our experts

Pro arbitration trend continues with strong outlook to the future

Doug Jones, Clayton Utz, Australia

It has now been just over four years since the 2010 amendments to Australia's International Arbitration Act 1974 (Cth) (IAA). The IAA had incorporated the 2006 amendments to the UNCITRAL Model Law on International Commercial Arbitration (Model Law) and underwent substantial reform as a result. This included the repeal of the IAA's provisions allowing parties to opt out of the Model Law, as well as the insertion of codified objects of the Act and matters to which courts must have regard in exercising powers or performing functions in relation to international arbitration proceedings in Australia.

These reforms were also accompanied by the introduction of the new Commercial Arbitration Acts (CAA) for domestic arbitration within Australia, which were also based on the Model Law. Last year, the Australian State of Queensland was the latest to adopt the CAA, which came into effect on 17 May 2013. As a result, all States and Territories in Australia, with the exception of the Australian Capital Territory, have now enacted domestic arbitration legislation based on the Model Law as amended in 2006.

Some specific amendments to the statutory regime included the enactment of sections 2D (the objects of the Act) and 39 (matters to which the court must have regard) of the IAA. In effect, these provisions codify the fundamental tenets of arbitration (efficiency, expediency, reduced cost and finality) and mandate Australian courts to acknowledge them whenever they exercise any power or perform any function in relation to an international arbitral proceeding or arbitral award. The Australian legislature has thus ensured that the vital advantages of arbitration will be instilled in every international arbitration in Australia in which a court may become involved.

Several important judicial developments have also taken place to allow Australia to stabilise its position as a world class venue for international arbitration. The single most important of these is the landmark decision handed down by the High Court of Australia in TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia (2013) 87 ALJR 410. In this case the constitutionality of the IAA was challenged on the bases that it impairs the institutional integrity of Australian Courts and that it improperly vests the judicial power of the Commonwealth in arbitral tribunals. The High Court unanimously rejected these arguments by noting the fundamentally contractual nature of arbitral power, as opposed to the coercive nature of judicial power, demonstrating an excellent exposition by the Australian judiciary of the fundamental principles of arbitration. As a result, the High Court upheld the constitutionality of the Model Law in Australia - a welcome decision reaffirming Australia as a highly desirable and neutral seat for the hearing of international arbitrations.

There have also been a number of decisions that have bolstered the country's pro-arbitration and pro-enforcement stance. In its most recent addition to the suit of such decisions, the Full Court of the Federal Court of Australia handed down its decision in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83, clarifying the previously dubious ground for recourse against international arbitral awards that allegedly conflict with public policy. The Full Court agreed with the primary judge, finding that the public policy ground requires fundamental norms of justice and fairness to be breached, and that awards will not be set aside for minor or technical breaches of the rules of natural justice. This decision is in line with previous decisions of the Federal Court which have treated public policy quite narrowly, including Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (2011) 277 ALR 415 and Traxys Europe Sa v Balaji Coke Industry Pvt Ltd (No 2) (2012) 291 ALR 99.

The amendments to Australia's international arbitration legislation outlined above, along with the strong pro-arbitration approach taken by Australian courts, have had a positive impact on the arbitration landscape in Australia. Australia is therefore well positioned to keep pace with international standards and users' expectations, and is ready to grasp the growing opportunities that arbitration has to offer.

The Australian Centre for International Commercial Arbitration (ACICA), Australia's pre-eminent international arbitration institution, has also continued to provide stellar case management for arbitrations in Australia. The streamlining of proceedings has proven most successful in maintaining international arbitration's position as an efficient and effective method of dispute resolution for international disputes. ACICA has a set of rules that is up to date with current best practice and has its own Expedited Rules and Emergency Arbitrator provisions. ACICA is also supported by a network of world class facilities provided by hearing centres. In 2010, ACICA entered into a cooperation with the Australian International Disputes Centre (AIDC) in Sydney. To provide further choices to parties wishing to arbitrate in Australia, the Melbourne Commercial Arbitration and Mediation Centre was launched in March 2014.

Since Australia's international arbitration legislative terrain was re-sculpted in 2010, the fruits of the reform are already noticeable and are expected to have a lasting impact on international arbitration in Australia for a while to come. The net effect of these reforms has been to increase Australia's pro-arbitration stance and to ensure that the IAA has remained aligned with international best practice. This has had the effect of advancing Australia as a hub for international arbitration and encouraging disputing parties to earnestly consider Australia as a viable option for their arbitration.

The statutory changes have also served to increase the quality of international arbitration in Australia by ensuring certainty and consistency in the way Australian international arbitration law has been applied. The recent decisions of Australia's courts evidence the resilient pro-enforcement attitude in Australia to reinforce its statutory welcoming of international arbitration matters to its shores.

All of these developments are a reflection of Australia's growing reputation as a centre for international arbitration and the strong foundations that have been put in place. Australia looks forward to taking the next step in raising its arbitration profile by hosting the upcoming Conference of the International Council for Commercial Arbitration (ICCA) in Sydney in 2018.